Luxury brands group files lawsuit against e-commerce firm

Chinese e-commerce giant Alibaba Group Holding on Sunday refuted an allegation that the company has been allowing counterfeit goods on its marketplace websites after a group of major luxury brands filed a lawsuit in the US on Friday.

France-based Kering SA-owned luxury brands such as Gucci, Yves Saint Laurent and Balenciaga filed a lawsuit against the e-commerce company in Manhattan federal court on Friday, seeking damages and an injunction for alleged violations of intellectual property rights of the company's brands. The plaintiffs argued that Alibaba has turned a blind eye to counterfeit goods by conspiring to produce, offer for sale and traffick fake goods.

Alibaba rebutted the allegation in a statement sent to the Global Times on Sunday, saying that its website "does not manufacture any products therefore the allegation that Allibaba's trading platform conspired to produce fake goods is groundless and [the company] will pursue an appropriate legal action."

"It's regretful that Kering SA has chosen to take unilateral action rather than to engage in constructive cooperation with Alibaba to solve the issues," the Hangzhou-based company said.

This is not the first time the French group has taken legal action against the e-commerce giant. Kering had filed a lawsuit against Alibaba in the US over the same issue in July 2014 but withdrew the case one month later. The case was dropped as they worked toward a resolution with Alibaba.

That Kering has filed a second lawsuit in less than one year might suggest that Kering is far from satisfied with the progress Alibaba has made in cracking down on fakes, Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times on Sunday.

The result of the lawsuit might depend on Alibaba's next moves in combating fakes, Lu said, adding the case would inevitably unnerve investors.

Alibaba has already faced several allegations criticizing the company for failing to protect intellectual property rights since the company's record-setting IPO last September.

On January 28, China's State Administration for Industry and Commerce (SAIC) published a strongly worded white paper based on talks with the company in July 2014, claiming that the company had previously failed to crack down on sales of counterfeit products.

Based on the white paper, five US law firms, led by San Diego-based Robbins Geller Rudman &Dowd LLP, filed class action lawsuits against Alibaba on January 30 over possible securities fraud, according to media reports.

On April 8, the American Apparel and Footwear Association, a US industry group that represents 1,000 global brands, filed two separate complaints to the US Securities and Exchange Commission and the US Trade Representative, saying that Alibaba's taobao.com platform is "one of the biggest platforms for counterfeit goods worldwide."

New York-listed Alibaba's stock price was $88.46 on Friday, a drop of more than 5 percent since its IPO in September 2014.

There is a question of whether online marketplace operators have done enough to fight against fakes, according to Feng Lin, an analyst at China e-Business Research Center, who said the experience of PayPal is an example of a more effective crackdown on fakes.

Unlike domestic operators of e-commerce platforms which have passively participated in the fight against counterfeiters, relying on complaints filed by customers and firms, Paypal takes an active approach by digging out fakes itself, Feng told the Global Times on Friday.

Alibaba said in the Sunday statement that the company spent more than 1 billion yuan ($161.16 million) for the first 11 months in 2014 in order to protect customers from fake goods and in the first three quarters in 2014, the e-commerce giant got rid of 6 million product listings linked to counterfeit products.

China's most popular social networking app, Tencent's WeChat, which has become a popular marketplace for e-commerce, unveiled a platform on April 30 on which consumers and sellers can report products that violate intellectual property rights.

Efforts by the Global Times to reach Tencent for further comment were unsuccessful by press time.

Apart from the efforts by e-commerce platforms, government authorities should take a harsher stance against counterfeiters, Lu advised.